Doing business in Southeast Asia – the corruption problem

How big a problem is corruption in this part of the world? To get the lowdown, we spoke to Franca Ciambella (pictured), Kenneth Pereire and Steven Trafford Taylor of Consilium Law Corporation.

On a global scale, how corrupt is Southeast Asia?

There is a significant amount of corruption in Southeast Asia. According to the Corruption Perceptions Index published by Transparency International in 2012, the level of perceived corruption (100 means little perceived corruption, 0 means highly corrupt) varies significantly. Some countries do very well, such as Singapore which scored 87. Other countries in the region score very poorly. Malaysia had a score of 49, and Indonesia, Vietnam, Thailand, Myanmar, Laos and Cambodia had scores ranging from 15 to 27.

What challenges does this present when doing business?

It’s important to conduct proper due diligence, which includes exploring third-party qualifications, reviewing payment terms, monitoring transactions and vetting distributors. Additionally, local corruption laws can be less comprehensive and their enforceability sporadic, and approval processes for doing business can be quite opaque, thereby creating opportunities for corruption to occur.

Can you provide specific examples of how it might rear its ugly head in a business deal?

Offering authorities a bribe in order to be granted an operational license or to avoid waiting times or for a sales order to be placed. Accounting fraud, including over or understating revenues, misdirecting revenues or other misrepresentations. Paying a public official to perform a task he is already called upon to perform is also seen as corruption. The OECD Convention on Combating Bribery of Foreign Public Officials sets global standards on bribery and requires participating countries to criminalise bribery of public officials.

How do international and local laws differ?

Some laws in various countries such as the US, UK and Canada even have extra-territorial effects; you and your company can be held liable outside the country where the legislation was enacted. For example, the US Foreign Corrupt Practices Act holds any person with a certain ‘degree of connection’ to the US or to a US company liable for corruption, even if the corrupt practice is outside the US. The UK Bribery Act has an even broader reach as it also applies to the failure to prevent bribery by UK companies operating anywhere in the world. The 10 ASEAN countries, including Singapore, which have enacted the Prevention of Corruption Act, also have local anti-corruption legislation. The advantage of ensuring compliance with, for example, OECD, US and UK legislation is that in doing so, you are also likely to comply with local laws on the matter. It remains important, however, to know the local laws that apply to your business.

What can businesses do to ensure that their employees don’t fall into a corruption trap?

Businesses should have a comprehensive compliance programme in place and be proactive in its implementation. Live training sessions are an efficient way of communicating anti-corruption practices to employees. Various laws provide compliance guidelines and companies should base their programmes on these guidelines. Preventive measures taken should also be proportional to the bribery risks that the company faces, and a proper understanding of these risks requires research and knowledge of the local market.

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